The British pound has leveled off on Friday, after sustaining sharp losses in Thursday trade. In the European session, the GBP/USD is trading at 1.2827, up 0.15% on the day.
Pound slumps on Brexit tensions
It has been a disastrous week for the British pound, which has fallen below the 1.28 level for the first time since July. GBP/USD has slipped 3.4% this week. The catalyst for this sharp decline has been the turbulence surrounding the Brexit talks, which resumed this week. The British government is playing hardball, with Prime Minister Johnson saying it would be a “good outcome” if the UK left the EU without a deal. The government has published a bill which allows the UK to “disapply” parts of the withdrawal agreement it signed with the EU in January. Predictably, the Europeans are fuming, saying this move had “seriously damaged trust” and are demanding that Johnson withdraw the bill. Are the two sides headed for a nasty collision? The pound has fallen to its lowest level since March and further turbulence over Brexit could cause jitters amongst investors and send the British currency even lower.
Overshadowed by the Brexit storm was some strong economic data out of the UK on Friday. In July, GDP came in at 6.6%, matching the estimate. This marked a third successive gain for the monthly GDP release. Industrial Production and Manufacturing Production both beat expectations, with solid gains of 5.2% and 6.3%, respectively. Still, these positive numbers weren’t enough to boost the pound, as the noise from Brexit has drowned out the news on the fundamentals front.
- There is resistance at 1.2976. Above, we find resistance at 1.3136
- The next support level is at 1.2715, which has held since late July. The next support line is at 1.2614
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